The following is my case for buying Fortuna Silver Mines (FSM) stock. The stock has been going down all year and it got slaughtered at the end of the week losing 21% in two days. This was because on Nov 10, the Mexican Ministry of Environment denied their request for a 10-year extension to operate their San Jose Mine.
Now is the time to buy it and here is why I believe it is a buy:
- The extension denial demanded two things. One (information) had already been provided and Fortuna showed that it was already provided. The other is a bunch of facilities not declared in the original environmental impact study. This is very common with mines. Stuff like an additional truck, a greenhouse, a soccer field for employees, a power transformer station, etc. These don’t seem like things that will cause a permanent denial to operate the mine.
- Fortuna got a court order to temporarily operate the mine while this issue is worked out. That indicates to me that the government really doesn’t want to shut it down. Mexican courts aren’t real courts. They are controlled arms of the government.
- The regulator informed Fortuna that they prefer a consultation procedure to resolve the issues. That seems like a good sign to me. I think this will get resolved administratively instead of in the courts, but Fortuna may get a permanent court injunction to operate anyway.
- They have two different shots at keeping the mine open and running. Dialogue with the regulator and the courts.
- Other mining companies have reported perplexing orders from the Ministry of Environment. It may be simply caused by these departments receiving less funding and personnel changes. That’s what it seems like to me, although I haven’t been able to confirm that employees have lost their positions or have changed recently. But there have been budget cuts and of course COVID.
- They settled a long dispute of $30 million in past royalties owed to Mexico for only $9.6 million. I suspect that the Ministry of Environment was being hard on Fortuna to get them to settle this other issue for cash, which they did. That’s now over.
- As part of the settlement, Fortuna agreed to pay a 3% royalty going forward into the future, and the government, just like all governments, wants that money.
- The local mayor traveled to meet Mexican legislators in support of Fortuna and the jobs it provides. Fortuna employs 1,200 directly, at the mine, but the entire town provides indirect services as well. Most of their employees are females and single mothers with kids.
- This is debt-free company with a debt to sales ratio of only 2%.
- They have 136 million in cash in the bank. That’s almost as much cash as their annual sales of $162 million.
- Silver is needed in the green movement and electrification of everything.
- Silver and gold are financial instruments and stores of value during times of high inflation, and we are in a time of high inflation.
- Central banks around the world don’t store bitcoin or diamonds. They store gold.
- Fortuna’s cost to mine an ounce of gold is $646/ounce Gold is currently selling for 1,865/ounce.
- Manuel Carlos, their VP of operations dumps Fortuna stock in January. but then starts buying it back in April.
Anyway, I think the stock is a good buy right now. Disclosure: I’m not a financial advisor… I just play one on InterNACHI’s forum.
Dang, hot stock tips too? This membership just keeps on giving!
As I predicted, the Mexican government granted them a 12 year extension: https://fortunasilver.com/investors/news/fortuna-receives-san-jose-mine-environmental-impact-authorization/
Now all we need is silver to go up to about $29. Almost every other commodity has gone way up. Silver should be next, IMHO.
For those that dabble in the stock market, what are your short-term plays right now? I took profits on some of my Ford stock and looking to dump some of that into a high-potential short-term play.
I looked into FSM that Nick likes but I just don’t know enough about precious metals to make a confident decision.
I’m currently in T and VIAC as short-term plays. I should also define what short-term means to me. One to two years max. In other words something that is not going into your IRA.
So nobody on here plays the market? What the heck you all do with your inspection millions, put it in a coffee can in the back yard?
Hey, I am just trying to maintain my minimum required balance for free checking, Goals.
Join a credit union, way better than the regular banks. I’ve never paid a dime in fees for anything, including online bill pay. The only fee would be if you use an ATM out of network but that has never been a big problem for me anyway. P.S., I know you were joking, lol.
If I can’t touch it, smell it, see it or taste it, I don’t buy it. I’ll stay semi safe…
I like owning dirt. Land is a good place to put your money for the long haul; they aren’t making any more of it.
For the short term, Tesla is on sale.
There are a few beer stocks out there, lol. You can touch it, taste it, smell it, and see it!
ABEV, TAP, CCU, BUD…
Sort of like drinking the fresh spring water from the land it’s on…or brewing your own brewskis…
I don’t play stocks. It can be profitable if you do, so can the craps tables in Vegas. Both are gambles…
If you like real estate, there is an investment vehicle called a REIT (Real Estate Investment Trust). It is basically part ownership in large property management firms. Shares trade just like regular stocks on the market. They typically pay out a higher dividend than your average stocks. It is one way of becoming a landlord without having to get your hands dirty.
I have several in my IRA and they are fairly stable with a good dividend and relatively low risk. You won’t see people day trading these stocks because they don’t have large enough swings in value over short time periods typically. You can choose to take your dividends in cash or have them reinvested to buy more of the stock.
We haven’t looked into this yet but they sound interesting. We’re currently slowly picking up properties to use as rentals. In my area, rents are high enough for a good cash flow and I like the idea of being able to pass them onto our kids later.
Just don’t buy in MN where they just passed rent control rules in our two largest cities. You would think basic economics would be a prerequisite to becoming a city council member but that’s not the case.
Sadly, I don’t think basic economics are taught anymore.
It is all social economics these days. Works great with “common core”.
52 week S&P 500 chart. A nice buying dip maybe. Lots of consumers will be getting their tax refunds over the next 8 weeks, leading to more spending.
And that’s how to make a quick $30K. Great run. Probably selling tomorrow and putting the $30K profit somewhere else.